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Last Updated: Thursday, 6 December 2007, 16:07 GMT
Have Your Say: house prices fall?
Couple looking in to an estate agent's window
Do you think that houses currently on the market are overvalued?

UK house prices saw their biggest fall in 12 years during November, according to Nationwide building society.

At the same time, the Bank of England said the number of mortgage approvals fell to a near three-year low.

But as always, experts remain
divided over what the future holds.

We asked for your comments - a selection of which are below - the debate is now closed.

Nothing is ever a one-way bet. We all have to learn that lesson
Stephen Hunt, London
The most important thing to do right now is to look hard at the lessons from previous crashes. Where values may be dropping steeply, this is only a problem if you plan on moving in the next 5 years. You can rely on lenders to be imaginative to avoid a huge amount of repossessions, but they will only be able to do so much. The best advice is to cut down on your commitments now and put a bit of money in the bank before the real problems start. You will not be able to rely on selling your house or getting a top-up mortgage to bale you out of any future problems, so you will need savings. If you are lucky, you will end up with an untouched cash pile at the end of the coming recession, which will put you in a strong position for the recovery. Do not kid yourself that this is just a blip. If it is, then the above is still good advice. I am an insolvency practitioner, so I am hiring like mad. Now that buyers and sellers both believe that further falls are likely and imminent, watch out for much more serious falls in the coming 2 years. It is good for some and bad for others. For UK plc I think it is good in the long-term, for this generation to be taught that nothing is ever a one-way bet. We all have to learn that lesson. Spare a thought for the hundreds of thousands who only got on the property ladder by getting a 100% fixed rate mortgage a couple of years ago. They now face a doubling of monthly payments and falling equity. These will become the core of the bankruptcies and repossessions in the coming years and many of them will be in their mid twenties. It is going to be very sad.
Stephen Hunt, London

Bad economic management has seen property prices rise too high and a correction now seems inevitable. This is good news for some and bad news for others, but the main problem overall is the volatility. For the present, we need a small cut in interest rates to help achieve a "soft landing". Hopefully, the authorities can then learn not to repeat their mistake of allowing too much easy credit and hence introduce relative stability in the housing market for the future.
Chris Grey, Guildford

A steep fall in prices would be good. If they stay at their obscenely high current levels it would mean that people who have been saving to buy a house will have effectively had their savings, and much more, "removed", and many workers, not only Public Sector, will need massive pay rises if they are ever to afford to buy a decent (rather than cheaply-built "affordable" ) home.
Richard, UK

Steven from Bristol, you are wonderful, you have confirmed my own thoughts. Thank goodness you made the effort to send a message, and I love Bristol.
Matthew Dickinson, Newark

A return to sustainable prices is great news for the long-term (real) stability of the economy
David Carboni, Guildford
I visit housepricecrash regularly and there is one simple fact that is often overlooked by mainstream commentators, which is that house prices have always averaged 3 to 3.5 times salary. That is a sustainable level of borrowing at normal interest rates, and fair value for property. We are currently anywhere form 6-10 times salary. Simple sums, really. A return to sustainable prices is great news for the long-term (real) stability of the economy.
David Carboni, Guildford

As a long term home owner this is not a threat to me, but I have felt that the price bubble in houses was far from good news but fuelled by stupid and greedy lending for purchasers, as shown in the Northern Rock debacle - some panic set in and with parents re-mortgaging to find deposits for their children, the competition for property was on the "up". I do not want to see a return to negative equity but I see no other outcome. Of course sellers and new purchasers will hang on as long as they can, in the hopes that things will get better, probably incurring more debt in the process. I would have hoped that the government would have had the courage to say that ever rising house prices were not all good news, to try to cool the market long ago, but the difficulty is that it suited them as a demonstration of the success of their policies of fiscal prudence. Tough on new young house buyers again.
Tim Conolly, Mirfield

Over the next few years I think it will fall - maybe 15% (fingers crossed)
Elaine Power, Newcastle on Tyne
I am a buy-to-let investor. I have been buying property since 1982. I have seen it all before. There will be a fall in prices. It has to happen. It cannot keep going up. In my case I would like to see a fall, so I can go back into the market. At present, lending money to buy just will not work. There is no yield. In the long term I can only see prices rising. We live on an island - we don't have more land. The population is growing and inflation will always go up so property will increase in value. But over the next few years I think it will fall - maybe 15% (fingers crossed).
Elaine Power, Newcastle on Tyne

House prices are still relatively cheap compared with rental incomes. There is still great demand for quality rented property. The UK is a densely populated country with a shortage of space. Compare the UK situation with Switzerland, another strong economy with high levels of migrant labour and high population density. UK house prices still have quite a lot further to rise to be comparable.
Anthony Cooke, Cambridge

Yes, I am in favour of a fall in house prices for several reasons: first time buyers and people who live in this part of the world (Cornwall and Devon) have been priced out of the market almost entirely by incomers and the ghastly, selfish, second-home owners. But I am also concerned with the "last time buyer". People like me who are retired and live in a modest three bedroom house in an area which has gone up in value so much, that if I want to move a bit closer to the surviving members of my family, but still wish to live in a similar house, it will cost me something like 20,000, with more than half the money going straight to government in stamp duty and VAT - and they do absolutely nothing for it - which is even less than the estate agent. And the stamp duty fiasco was set up by one of the meanest chancellors (to ordinary people) we have seen.
Peter Cocks, Bideford

Immigration, housing shortages and other spurious arguments used to explain the bubble are exactly that
Nigel Watson, Guildford
The supply of sports cars is strictly limited. However, the demand for these cars is huge. Who wouldn't want one? People who chant out "supply and demand" to explain the UK house price bubble tend not to know much about economics, and in particular the difference between effective and potential demand. The most important factor that has created the 200% increase in UK house prices is access to cheap and easy credit. Most houses are financed on credit. Take away 7x mortgages, self-cert (lie to buy) and you also take away most of the effective demand from the market. Market prices fall back into equilibrium at a level equal to what banks are now willing to lend (a return to 3x income multiples) Immigration, housing shortages and other spurious arguments used to explain the bubble are exactly that. House prices are determined by balance between supply and effective demand, not supply versus potential demand.
Nigel Watson, Guildford

Why should we work all our lives while living in poverty to pay for something that is so over-priced? This needs correcting. If the government or Bank of England in any way think that it is their responsibility to support house prices, I think they must have a vested interest. History is littered with asset price bubbles. As the bubble inflates no one thinks the price will fall. There are always those that think this is a new era and there are factors to support the asset price - those are the ones with investments in the bubble. This house price bubble has been created by easy money - easy money that has been provided by banks.. The Bank of England has to use the CPI as its inflation target. Why is this - why not use RPI? Please explain why Gordon Brown has allowed this house price bubble?
Neil, Herts

The only reason there is a shortage is because buy-to-let credit was so cheap
Paul, Doncaster
I think a price drop is on the cards, as not only have we got the credit crunch, but we have had the interest rate rises and first-time-buyers were already stretched to the limit. Therefore I cannot see house prices rising for a long while. On the question of shortage, the only reason there is a shortage is because buy-to-let credit was so cheap that anyone could borrow to become a landlord. This, as the figures show on the increase of buy-to-let mortgages, took hundreds of thousands of homes out of the housing stock. I believe that now credit is harder to get for buy-to-let investors and the fact that buy-to-let is now not as attractive, a lot of buy-to-let will flood back in to the housing stock.
Paul, Doncaster

I am on 35,000 a year with a large deposit. However I can not even afford the cheapest property. It is all overvalued and I blame the property speculators ramping prices up, together with loose lending. It is a false economy and vulnerable to a crash especially in this credit crunch.
Gavin, London

In the long term it can only be a good (and inevitable) thing
Peter Jones, Oxford
First-time and upgrading buyers obviously stand to benefit from lower house prices with a decrease in mortgage costs. Would this not also have a broader benefit for the economy - for they would then have more disposable income to spend on furniture, home improvements, entertainment etc.? Yes, those who had bought into the housing market in recent years would suffer, but in the long term it can only be a good (and inevitable) thing for house prices to return to a more reasonable relationship with most people's incomes.
Peter Jones, Oxford

Of course a fall in house prices would be good. I have a "good" job that, while not particularly well paid (21,000 per year) requires a postgraduate qualification. In my line of work - teaching English as a foreign language - I cannot really expect to earn much more. Surely I should be able to buy my own home at this stage in my life? And if not, surely I should have access to a type of long-term tenancy agreement? What kind of society is this where someone who has worked hard, studied hard and achieved success in her line of work is forced to accept a home that could be taken away from her with just one month's notice? Not a very compassionate, caring or fair one, I would hazard.
Jessica Watson, Edinburgh

A five or 10% fall is neither here nor there - it is like standing on a ladder to be closer to the moon
Steven Lane, Bristol
The only way many people, myself included, will ever afford property, is if the prices fall dramatically. Such a fall would obviously have negative effects for current owners and probably portend of wider economic problems. A five or 10% fall is neither here nor there - it is like standing on a ladder to be closer to the moon.
Steven Lane, Bristol

Comments that house prices are overvalued need to be considered in the economic context of demand and supply, especially when translated into forecasts for house prices falls, as demand and supply will change over the forecast period. For instance, if house prices are 40% overvalued relative to income and the market corrects over 5 years, then house prices will not fall by 40% over that period as incomes will rise. If incomes rise by 25%, say, then in nominal terms house prices will only fall by 11%.
Mike Smith, London

The comments we publish are not necessarily the views of the BBC but will reflect the balance of views we have received. It is helpful if contributors state if they work for any organisation relevant to an issue discussed. Readers should form their own views on whether messages published represent undeclared interests, or views prompted by a common source.

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External internet links
30 Nov 07 |  Moneybox
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